Rupee Slides on Energy Supply Concerns

The indian rupee fell to around 93 per dollar, retreating after a brief stabilization as heightened geopolitical tensions in the Middle East continue to weigh on sentiment. President Donald Trump’s threats to target Iran’s power infrastructurehave added pressure on energy markets, and Iran has kept the Strait of Hormuz closed, rejecting calls to reopen without compensation. Over the past year, the rupee has depreciated 8.2%, and efforts to defend the currency have led to a $40 billion drawdown in foreign-exchange reserves over the last four weeks. Limiting the downside, the RBI has implemented tighter measures to curb speculative activity. Restrictions on forward transactions and stricter limits on banks’ foreign-exchange positions, including a $100 million cap on net open positions, have triggered a rush to unwind trades. The government has also provided relief to domestic industries by exempting critical petrochemical imports from customs duty for three months, through June 30.

The Indian rupee steadied around 92.9 per USD, holding its recent gains in thin holiday trading, but headed for a sharp weekly rise amid tighter measures by the central bank to curb speculative bets. The rally has been underpinned by a series of Reserve Bank actions to restrict speculative FX trading, including curbs on forward transactions and tighter limits on banks’ foreign exchange positions. These steps have triggered dollar selling in the onshore market and helped support the rupee, while also tightening hedging conditions and widening gaps with offshore pricing. Elsewhere, hopes that the Strait of Hormuz would partially reopen supported sentiment. Iran and Oman are said to be developing a protocol to “monitor transit” through the strategic waterway, a move aimed at easing regional tensions. India and other countries are also actively negotiating with Tehran to ensure the safe passage of vessels, while also forming small diplomatic circles and exploring barter-style agreements.

The Indian rupee edged down to around 93.2 per dollar, pausing gains amid persistent capital outflows and heightened geopolitical tensions. The currency has been under pressure from spillovers of the Iran war, prompting the Reserve Bank of India to step up measures against arbitrage and forward contract manipulation. After an earlier crackdown on banks failed to ease volatility, corporates were barred from rebooking cancelled foreign exchange contracts, and derivative trades with related parties were restricted. Analysts noted that while these measures aim to curb speculative activity, the rupee remains vulnerable as oil prices stay elevated and capital inflows remain limited. Adding to the downward pressure, President Donald Trump’s 20-minute prime-time address said the US is “very close” to completing its military objectives in Iran, while warning of potential escalation.